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  • Fran 9:51 am on February 2, 2016 Permalink | Reply
    Tags: , , risk management, SRI   

    What’s next for investors after Paris? 

    Our new associate Kajetan Czyz Analyst, Governance and Sustainable Investment at BMO, explains why Paris has galvanised investors and highlights the changes in low carbon finance expected in 2016.

    JaLON_2016 bw

    In the run-up to the Paris talks, investors participated in discussions with policymakers. Their key asks? To give the investment community a clear direction of travel including a long-term target, supported by country-level plans. Here are 5 reasons investors can feel good.

    The Paris Agreement meets all key investor expectations, and crucially during 2016 global regulators will focus on the elephant in the room—the financial sector’s role in addressing climate change.

    1. Long-term goal
    The Agreement sets an ambition to achieve “a balance between sources and sinks of greenhouse gases in the second half of this century” while “peaking emissions as soon as possible.” In other words the world should become carbon-neutral.

    2. National commitments
    Every participating country is obliged to produce a national emissions reduction plan (“Nationally Determined Contributions” or NDCs). All but six countries have already done so.

    3. Review mechanism
    NDCs will be reviewed in 2018 and then every five years to ensure they are in line with the Agreement’s aim to hold the global temperature rise to “well below 2°C” and “pursue efforts to limit the temperature increase to 1.5°C.” A key clause states that the NDCs cannot be weakened.

    4. Transparency
    The Agreement has introduced a monitoring and verification requirement for all countries, and a global stocktaking of reduction efforts in 2023. This increases the certainty that measures are being implemented, and serves as peer pressure through “naming-and-shaming” laggards.

    5. Finance
    Developed countries have now agreed to fully fund the Green Climate Fund up to $100 billion per year from a “variety of sources,” which includes private finance.

    The UN Climate Summit in Paris gives investors greater clarity than ever before about the political willingness to transition the global energy system to a post-fossil fuel future. This will have a profound impact on energy producers and users alike. It also has implications for fund management and strategic asset allocation decisions.

    So what exactly is next for investors? Some countries, most notably France, have set in place a requirement for investors to assess the impact of their investments and analyse their carbon risk exposure. More countries are expected to follow suit, and prudent investors have already began work in this area, e.g. AXA.

    Expect 2016 to see scaling up by financial regulators on climate change. The Paris Agreement commits governments to “making financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.” And as implementation gets underway, investors will be expected to take action to support this.

    Four developments investors are watching:

    1. Sweden is the first country to announce a review obliging its financial regulator to ensure the financial system is “financing sustainable development.”
    2. France’s new Energy Transition Law requires institutional investors to provide the carbon footprints of their investments, review their portfolio’s alignment with a low-carbon development pathway, and to disclose methods of integrating climate-related risks. Guidance on implementation has recently been finalised.
    3. In the UK, Mark Carney, Governor of the Bank of England and Chair of the Financial Stability Board (FSB) announced an industry-led Task Force on Climate-related Financial Disclosures (TCFD) to be chaired by Michael Bloomberg.
    4. The Chinese G20 presidency is set to make “Green Finance” a priority area for 2016, with the Paris deal on climate change—and the energy transition—a mainstream investor issue.

    The direction of travel couldn’t be clearer.

  • andrea 10:34 am on February 20, 2015 Permalink | Reply
    Tags: , carbon, , , , politics, risk management,   

    Age of the Corporate Climate Activist 

    It’s not often you hear a giant in sustainability issue a call to arms. But at a recent Global Compact event on his first visit to Australia that’s exactly what Bob Massie did.

    The fight in question? Equipping ourselves with the right frameworks, mindsets and leadership skills to deal with the climate challenge.

    In the face of trials like global warming our institutions are failing us. On some fronts—like rooftop solar—we’re doing pretty well but not on the scale or timeframe we need. Urgency is missing. We’re simply not moving fast enough and our political institutions are paralysed by vested interests.

    Recalling the milestone 1970s book Future Shock by Alvin Toffler, Bob underscored how the speed of change today far outstrips the ability of human institutions to adapt and respond. The result is that on virtually every front we need to rethink how we do things—from energy generation and creation of economic value to democracy itself.

    The amazing Bob Massie. It's time for us all to be climate superheroes.

    The amazing Bob Massie. It’s time for us all to be climate superheroes.

    Bob Massie is a seasoned veteran in corporate responsibility. He was president of Ceres—the largest coalition of investors and environmental groups in the United States—co-founder and chair of the Global Reporting Initiative, and the brains behind the Investor Network on Climate Risk, which counts over 100 members with combined assets of over $10 trillion. He’s been in the game a long time and can see that the window of opportunity to be proactive on climate is closing fast.

    “I’ve been in this 25 years. Back then it was ‘there are going to be long-term extreme events.’ Now we’re experiencing them. Suddenly we’re facing real costs. We have to rethink, plan for the massive structural changes needed to deal with the climate challenge.”

    He’s in good company. Last year’s Risky Business report from US establishment behemoths Michael R. Bloomberg, Henry Paulson and Tom Steyer catalogued the significant economic risks of a carbon bubble and staying on the current emissions path. As well as action at local and corporate level, governments need to set consistent policy and regulatory frameworks to shift the global economy away from carbon-intensive industries and investments.

    “The global future of coal is grim,” Massie insisted. “Look at China, look at India—they’re unlikely to be long-term markets for coal. Even Goldman Sachs is saying ‘treat it like someone who’s reached their 65th birthday—tell it to go off and have a quiet retirement.’ But we have to ask how do we manage that shift?”

    Government’s job is to plan ahead: if jobs in threatened industries go, what are we going to do? What’s the plan? We can’t avoid change—and neglecting these issues is only going to make them worse. We have to ask ourselves if our system of government is really up to the task.”

    The biggest barrier, in Bob’s view, is mental—a failure of imagination—because the potential economic opportunities around climate change boggle the mind. You only have to look at distributed energy to see that we can apply our incredible reserves of human energy and ingenuity to rethink the world, rethink the basic structures of the past 50-100 years.

    So how do we engage that mindshift and galvanise the necessary political will? For Bob Massie it’s a numbers game. “If you want politicians to lead you have to form a parade and they will find their way to the front. We have to form parades. The future of climate change is in our hands. We live in the most important piece of human history ever. What we’re able to do will determine what our planet becomes. We have to act now to make sure those outcomes are good.”

    Time for business to bring out the banners and hit the streets.

    • africa Zanella 9:38 pm on February 21, 2015 Permalink

      This man is a titan of strength and moral values .I had the pleasure of listening to him speak at the GRI Amsterdam conference VIP dinner .after many speeches, some wine and the customary hard work , i was “zonning out ” or going into meditative state as I like to do to rest the mind when I heard his voice singing a gospel song …..wow ! that was the beginning of his speech and story as to why he cofounded GRI and he held me in alert and hanging to each of his words . One bright idea after another and a mix of emotion and rationality that you could not help to admire .He crosses over from imagination to implementation like nooone i have ever seen ..adding inspiration and leadership to its mix …Business and government are all part of the society so I believe that this broader focus rather than the monolithic separation of roles is required for the climate change issues to be worked out .Sorry I missed his visit to Australia

  • andrea 9:10 am on November 19, 2012 Permalink | Reply
    Tags: accoun, , ethical business practices, risk management, stakeholder,   

    Corporate responsibility: protecting the bottom line 

    Following a week in which BBC executives in the UK have squirmed to offload responsibility in the wake of the vile Jimmy Savile child sex scandal, HSBC fights new allegations of unethical business practices in Jersey, and BP has agreed to $4.5bn in fines relating to the Deepwater Horizon disaster in the US, the case for corporate responsibility (CR) could not be stronger.

    For BP, this is only an interim settlement. Clean Water Act claims could see the bill rise to $21bn according to the International Herald Tribune, while Bernstein Research puts the cost of the spill as high as $41.9-59.4bn. For HSBC, the offshore accounts scandal is just the latest in a series of systemic corporate responsibility failures—from involvement in Libor-rigging and the US subprime lending crisis, to mis-selling of payment protection insurance (PPI) in the UK and money laundering in Mexico—for which the company expects fines to top $1.5bn, according to CSMonitor.com. The long-term damage to its brand may be far greater.

    These headlines showcase what happens when adequate safeguards are missing and a culture of unaccountability is allowed to grow. Of course it’s impossible to say problems like these won’t arise for companies with robust CR systems. But they’re more likely to be detected, less likely to go as spectacularly wrong, and can be resolved more swiftly, effectively and amicably when they do arise. CR has a vital role—in preventing things from going wrong as well as in helping to put them right.

    Last week also marked the 60th anniversary of what is perhaps the greatest example of abuse and atonement. Since 1952, Germany’s post-war reparations program has paid out compensation totaling US$89bn to victims of the Nazis. During this time, the agreement has been altered to make it easier for survivors to claim and the German Finance Ministry and the Claims Conference—representing the victims—have worked as partners with the shared goal of reaching as many survivors as possible. For Julius Berman, chairman of the Claims Conference, it is less about money and all about recognition. For Werner Gatzer, leader of the German negotiations, it’s all about responsibility: Germany, he claims, will only have done enough when no more survivors remain. “As long as they live, we will uphold our responsibility.”* It’s a mindset the BBC, BP and HSBC could certainly learn from.

    Five key steps can help companies stay on the right track:

    1. SUSTAINABILITY RADAR: continuously revisit your awareness of material issues, assessment of risks and regulation, grasp of global standards, and map emerging societal expectations.
    2. SYSTEMS RESILIENCE: ensure high-performance risk management, emergency response and business ethics programs are in place, supported by a positive culture of continuous improvement, where questioning and the precautionary approach are encouraged and rewarded. Integrate your sustainability priorities and values into your business goals and strategies so employees don’t face conflicting expectations.
    3. STAKEHOLDER RESPONSIVENESS: engage with relevant stakeholders around materiality and risk monitoring to increase awareness, improve management and build a shared sense of responsibility, partnership and collaboration for when things go wrong.
    4. REPUTATION & GOODWILL: don’t take trust for granted—it’s hard to put a value on it until it’s gone. Invest boldly in preventing CR lapses and make transparency a core principle.
    5. ACTIVE ACCOUNTABILITY: when things do go wrong, be the first to acknowledge it, and respond quickly and visibly to put things right. Direct efforts into finding out how it happened and ensuring it never happens again, not into trying to offload the blame or cover up misdemeanors.

    Your bottom line will thank you for it.

    *[IHT, Sat-Sun Nov 17-18 2012; p.3]


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